Business Directories

Qatar project activity picking up pace in 2013

Kuwait, August 5, 2013

Thirty-five contracts worth approximately $27.5 billion were awarded in Qatar during the first half of 2013, a report said, highlighting that it is an increase of nearly 30 per cent on the value of contracts awarded in all of 2012.

With an estimated value of $243 billion, Qatar’s projects market is the third largest in the GCC, added the latest Economic Update released by the National Bank of Kuwait (NBK).

High value contracts tendered during the first half of 2013 are primarily transportation and construction-related: tunneling for the Doha Metro (Red, Green and Gold lines, Msheireb and Education City stations) worth approximately $12.3 billion and commencement of the $9.9 billion Barwa Al-Khor real estate development.

Should project activity gain more traction in 2013, a further $29 billion worth of contracts are expected to be awarded during the second half of the year, according to NBK.

This would put the total at $56.5 billion, which is more than double the value of contracts awarded in 2012. The package of contracts associated with the local roads and drainage program that is managed by the public works authority Ashghal is likely to be the main focus of project activity.

According to the Economic Update, Qatar’s projects market has been driven by the twin targets of national development and infrastructure construction associated specifically with the World Cup in 2022.

National development is being spearheaded by the government as per the National Development Strategy (NDS 2011-16) and broader Qatar National Vision 2030 (QNV). Following completion of Qatar’s massive hydrocarbon investment program, which culminated in the final expansion of LNG capacity in 2011, as part of the NDS, efforts are under way to diversify and stimulate the country’s non-hydrocarbon economy—manufacturing, public infrastructure, services etc.

Outstanding projects in Qatar are therefore predominantly construction, transportation and industrial sector-related, said NBK in the update, adding that high-profile development projects include the Lusail City development, integrated railway project, New Doha port, Barzan gas development and World Cup 2022 football stadia.

The NDS has earmarked $225 billion in development spending (2011-16), of which $150 billion is to be borne by the government and state-owned Qatar Petroleum (QP). The private sector, along with other public entities, is expected to finance the remaining portion of approximately $100 billion.

The government has been funding its part of the development plan through the budget, while public sector entities and the private sector more generally have relied on a combination of debt issuance and bank credit. With regard to debt issuance, the authorities have established a sovereign US dollar benchmark yield curve that has facilitated borrowing by domestic government-owned corporates via the debt markets.

With a focus on delivering its investment program, the government announced another expansionary budget for fiscal year (FY) 2013/14. Capital spending is forecast to increase by 17 per cent over last year’s estimates. As a share of GDP, public investment in Qatar during the last five years has averaged 30 per cent, the highest in the GCC, NBK noted in the report.

Actual capital spending, however, has frequently fallen short of the government’s targets, by 22 per cent in FY2011/12 and 33 per cent in FY2012/13. In terms of the balance on government-funded capital projects, $92.9 billion of an estimated $117.5 billion was outstanding at the end of 2012—although the commencement of work on the major public works projects during the last few months would have gone some way towards reducing that figure.

Concerns have been expressed that project execution has not progressed to the extent that many had been expecting at the outset, NBK said.

Logistical and personnel constraints, coupled with challenges in managing a pipeline of projects on this scale, are among the main reasons cited for delays in project implementation. Design changes mid-way through a project have also affected delivery, as illustrated by the delayed opening of the $18 billion Hamad International Airport.

Nevertheless, despite the fixed deadline of the World Cup in 2022 drawing ever nearer, there is optimism that projects will eventually be delivered on time—more than 51 per cent of the projects have actually entered the execution phase, according to Meed.

Moreover, GDP figures recently released by the Qatar Statistics Authority (QSA) show that the construction sector was especially buoyant during the first quarter of the year, growing by 11.7 per cent y/y and 6.3 per cent q/q. Credit growth, meanwhile, continues to grow by a robust 18 per cent y/y (as of May).

Qatar’s government, for its part, has reiterated its commitment to addressing many of the constraining issues such as bottlenecks in supply, shortage of project management expertise and the current, sub-optimal level of private sector involvement in the development plan, the NBK Economic Update said. – TradeArabia News Service